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If the particular channels through which changes in the money supply affect aggregate
income are diverse and continually changing, the best evidence of monetary policy's effect is
likely to come from ____.
A) reduced-form models
B) structural models
C) median-voter models
D) indirect models
Answer: A
Diff: 2 Type: MC Page Ref: 27.1A- 4
Skill: Recall
Objective List: Appendix: Evaluating Empirical Evidence
Monetarists' preference for reduced-form models is based on their belief that ____.
A) reverse causation is a problem
B) structural models may understate money's effect on economic activity
C) money supply changes are always endogenous
D) monetary policy affects only investment spending
Answer: B
Diff: 2 Type: MC Page Ref: 27.1A- 4
Skill: Recall
Objective List: Appendix: Evaluating Empirical Evidence
When Keynesians argue that "correlation does not necessarily imply causation," they are
probably criticizing ____.
A) structural-model evidence
B) reduced-form evidence
C) indirect-model evidence
D) black-box evidence
Answer: B
Diff: 2 Type: MC Page Ref: 27.1A- 4
Skill: Recall
Objective List: Appendix: Evaluating Empirical Evidence
A basic principle in economics is that correlation ____ imply ____.
A) does not necessarily; causation
B) does; causation
C) does not necessarily; independence
D) Both A and C
Answer: D
Diff: 3 Type: MC Page Ref: 27.1A- 4
Skill: Recall
Objective List: Appendix: Evaluating Empirical Evidence